Moody's Sees More Price Drops

Commercial real estate property prices declined for the third month in a row in January, falling 0.6% from December, as measured by the Moody's/REAL commercial property price index (CPPI).

The index is now approximately 2.4% below its peak in October 2007. Moody's expects the index to decline another 15% to 20% before bottoming out.

The CPPI measures the change in actual transaction prices for commercial real estate assets based on the repeat sales of the same assets at different points in time.

According to Moody's analysis of the data, the three consecutive months of falling prices have eroded—even reversed—the run-up in prices that occurred over the last few years.

“This month, the year-over-year increase in prices was 4.5%, well below the 8.3% annual rate reported last month, and the two-year change in prices of 12.5% is down from the 17.4% measure for the same time frame last month,” said the Moody's report, authored by Sally Gordon and Tad Philipp.